this in no criticism of the present Secretary of the Treasury; I am one of his admirers. He is a great man. I do not hold him responsible for the increase in our debt during the Eisenhower administration. I know he is concerned and wants to reduce the debt.

This administration has neither had the wisdom nor the ability to reduce the debt, nor the courage to tell the American people that they are mortgaged to the gills and that absolutely nothing has been done to reduce the debt.

There has been no plan, I repeat, no plan, presented to Congress by the executive department, during the 4 years I have been in Congress, to reduce this debt. Let us try the plan proposed in my bill. If it does not work, the law can be repealed next year. Shall we say we are unwilling to try? I cannot discharge my responsibility that way, nor do I take the situation lightly when my children face a world of tomorrow where their dollar is soft currency, possibly without any gold to back up that currency.

Do we have no brakes on the debt and price vehicle we call inflation? Do we want brakes? Have not we, as representatives of the American people, a responsibility of leadership in the matter of debt reduction? Dare we wait until public alarm and public clamor forces us to act? No. It will be too late then.

I suspect that one of the reasons for our loss of prestige in the world of today is our debt and our continued refusal to take steps in the direction I seek here. Canada's dollar is, in world eyes, "sounder" than ours. If Canada can do it, why can we not? If Western Germany can make the comeback it has despite war and destruction, why can we not? True, the Germans will work. They will work toward debt reduction, too.

The text of my bill is:

No

Except in time of war, each budget submitted to the Congress shall include a request for an item of appropriation equal to 1 per centum of the aggregate face amount of the obligations outstanding as of July 1 of the calendar year in which this sentence is enacted which are included as a part of the public debt. Such item shall be used exclusively for the retirement of the public debt. budget for any fiscal year shall be considered as balanced, or as providing for estimated receipts equal to or in excess of estimated expenditures, unless such item is taken into account, and considered as an estimated expenditure for such fiscal year.

SEC. 2. Section 202 of the Budget and Accounting Act, 1921 (31 U.S.C. 13), is amended (1) by striking out "loans", in subsection (a); (2) by inserting immediately after "appropriate action" in subsection (a) the following: "(including, but only in time of war, loans)"; and (3) by adding at the end thereof the following:

(c) Except in time of war, no budget shall be submitted to the Congress for any fiscal year which shall request appropriations aggregating in excess of the total of appropriations requested in the budget submitted for the prior fiscal year.

If we reduced a $290 billion debt 1 percent, we would not only "save" that $2.9 billion, but we would save an additional amount of $87 million in interest, if we calculate at 3 percent which might be used as an average, since, on June 30, 1959, we had outstanding $237plus billion of debt carrying average interest payments of $2.899, another $27-plus billion at 3.304 percent, and the cost has steadily risen.

A 1-percent reduction could be used as a sample. Are we unwilling to try? Perhaps we could progress to greater percentages.

1

How could it be accomplished the first year? Call on every department to reduce its budget for its proportionate share. I believe the morale of Government would be raised and inspired if we could say, "we are trying to do something about the debt; we are all trying. The Government is the only borrower I know that makes no effort to reduce its debt.

No loans are made by our leading financial institutions without a plan and a promise of debt reduction at regular or specified intervals. No one in successful businesses would think of going to his banker when his loan was due and telling his banker that he not only could not pay off but that he wanted to borrow more.

If we demand solvency as a rule of business, why cannot our Government practice solvency? I know there are those who say the Government is not like a business. That is true, but that is only an excuse for faulty fiscal policies and faulty fiscal management. I dare any man in this Congress to advocate bad business practices in the handling of our national debt.

No, no one is going to advocate bad business practices openly. But by not meeting the problem head on and doing something about it, the administration and the Congress are sponsoring indirectly what they do not sponsor directly.

We can no longer neglect this problem. In private business the man who neglects his debts goes bankrupt, and this Government can go bankrupt or have the value of its dollar go to the dogs, which is the equivalent.

We are told we are the world banker. If we are, we are setting a poor example.

I beg of you, Mr. Chairman and members of this great and useful committee, that you welcome and promote this opportunity to help our great country.

Thank you.

Chairman DAWSON. Congressman Gubser is our next witness.

STATEMENT OF HON. CHARLES S. GUBSER, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA

Mr. GUBSER. Thank you very much, Mr. Chairman. I appreciate the opportunity to appear on my resolution, and doubly appreciate the fact that the committee is giving consideration to this important subject.

The purpose of my resolution is, as the title states, to prevent deficit financing. It should be more properly worded

to help prevent deficit financing by requiring that any amount appropriated in any one fiscal year in excess of the budget requests by the President carry with it a means of raising the revenue.

First let me address myself to the imperfections of the proposal. It is inflexible. It would apply in years when the economy needs the stimulation of deficit financing. It doesn't regulate the appropriation bills which are passed earlier in the year, and it would consequently place a squeeze upon the bills which are acted upon later in the session.

I admit these imperfections, but nevertheless I state that inflexible as this system may be, and possibly inadequate as it might be, it is

far better than the present system, because over the years we in Congress on both sides of the aisle have a tendency to engage in what I call slippery arithmetic, and it is due largely to the things which Mr. Ullman so ably pointed out, that this budget is a horse and rabbit stew that very few people in this whole country properly understand. As a result, you hear all sorts of figures bandied about. For example, I have heard it said that the combined action of the 83d, 84th, and 85th Congresses was a reduction in budgetary requests of the President by some 22.6 billions of dollars.

Technically, if you want to take one point of view, that is correct. It is about as correct as saying that you had an automobile with a bright shiny body, when someone overlooked putting the engine in it. It doesn't tell the whole story.

Actually, it doesn't take into consideration increased lending authorizations, and increased authority to incur obligations which we commonly refer to as back-door spending, and deficiency appropriations which restore earlier budget cuts. It doesn't take into account unrecommended tax cuts. It doesn't take into account the failure to pass recommended tax increases. So I think that the figures which are passed around are utilized by a great many different people who serve their own purpose. The present system, to summarize, has in times of prosperity resulted in a gradual increase in the obligations of the United States as secured by Government bonds and negotiable instruments, and as represented by future obligations which this country is committed to pay without further action on the part of the Congress.

Now, to me this is a system which should be abhorrent to all of us when consistently in periods of good times we do allow this sort of thing to take place. If we don't allow ourselves the luxury of using slippery artithmetic, we will have to admit that the obligations of the future taxpayers are going up each and every year, and I don't think anyone can dispute that. I quote as my authority Mr. Stans, Director of the Budget, whom I know is partisan at times, but who also is an eminent certified public accountant, and whom I think is a truthful man.

Now, gentlemen, I have seen the system which I propose in practical operation. I was privileged to serve in the Legislature of California when our present Chief Justice, Earl Warren, was our Governor. I was privileged to work very closely with him. I admit that this practice which I propose was brought about not by statute, or not by the method which I propose, but the practical effect was exactly the same, because the Governor of California has the privilege of a lineitem veto.

Governor Warren, and his successor, Governor Knight, and his successor, Governor Brown, have religiously followed the practice of vetoing any item which is in excess of the budget or is a new expenditure which does not carry with it a revenue-producing measure. As a result, the State of California, I am proud to say, has been able to absorb a most tremendous population influx, build proper schools, and to build reasonably good roads which are all paid for. We have done this by following the very policy which I recommend today, which I say to you is imperfect, but which is certainly better than the system that we are operating under at the present time. On that basis I

58926-60

again thank you for considering this, and respectfully urge your sincere consideration.

Chairman DAWSON. Mr. Fascell.

Mr. FASCELL. Thank you, Mr. Chairman.

I have several questions that have occurred to me in this discussion which my colleague has so ably presented. For example, on an extra budgetary item-that is an appropriation made by Congress, not in the budget-why does the executive branch pay any attention to that item? It has been suggested, for example, that the President should have an item veto. I am not so sure about that, because he doesn't have to spend the money if he doesn't want to. The department head doesn't have to do it. The department head can't even get the money unless the Bureau of the Budget gives it to him after it has been appropriated. Do you feel that any legislation is necessary with respect to the controlling of a nonbudgetary appropriation?

Mr. GUBSER. I feel this way, that regardless of which administration happens to freeze funds which are voted in due process by the Congress of the United States, that it is wrong. We express the will of the American people. I think we are the responsible body, and we are the policymaking body. What we direct should be done by the executive branch. I also think that if it were more the policy that the executive branch would be found to follow the policy set down by Congress, there would be more responsibility on the part of Congress, too.

Mr. FASCELL. Then, as I understand it, you really don't feel, as an addition to your proposal, the President should have a line item veto power?

Mr. GUBSER. No; if he had the line item veto power, this would be completely meaningless and unnecessary. That, of course, I would prefer.

Mr. FASCELL. Now let me ask you about this other thought, and that is this: I don't quite reconcile your position, frankly, on how you would support line-item veto, and then be against the administration not doing what Congress does regardless of the budget.

Mr. GUBSER. Because the line-item veto could come back to Congress, and we would have the possibility to override it through the means the Constitution prescribes.

Mr. FASCELL. How does your proposal become effective in the face of an appropriation bill?

Mr. GUBSER. I am afraid I don't understand the question.

Mr. FASCELL. Well, in other words, when you pass an appropriation bill, it is a new law.

Mr. GUBSER. That is right.

Mr. FASCELL. And if it doesn't do what your law says, then your law has been amended.

Mr. GUBSER. The part of the appropriation which would be in excess of the budget would be inoperative.

Mr. FASCELL. How can you do that? It is a subsequent act of Congress.

Mr. GUBSER. This is a resolution, as you see, and I would not get into the question of which would take precedence. I would presume the public law would, so we could consider this more or less as a guidepost, which I will admit could probably be ignored at will.

Mr. FASCELL. In other words, you would have a resolution in one Congress not binding on any other Congress.

Mr. GUBSER. That is correct.

Mr. FASCELL. But you would like an expression of some Congress on the subject, and that is the purpose of your resolution?

Mr. GUBSER. That is absolutely right.

Mr. FASCELL. How about turning your proposal around, instead of putting a limitation in this fashion, why not put a limitation on on expenditures?

Mr. GUBSER. Mr. Fascell, I would be happy to see this Congress do anything along these lines, and if you could turn it around, turn it sidewise, or do anything that tends to get us away from the slippery arithmetic we have been using for so many years, I would be all for it.

Mr. FASCELL. I am happy to hear you say that, and I concur with you. I see no political capital, and I see a great deal of danger in everybody analyzing or interpreting the budget to suit themselves, because the sufferers of that process are the American people.

That is all I have, Mr. Chairman.

Chairman DAWSON. Mr. Smith.

Mr. SMITH. Under your bill, now, suppose the first bill that went through, which is a bill to appropriate some money for something that was not in the President's budget, would there have to be a tax bill with that, too!

Mr. GUBSER. Not as I read it, no.

Mr. SMITH. It would depend, then, on whose bill was passed first?

Mr. GUBSER. That is why I pointed out as an imperfection of the proposal the fact that there would be no restraint on the earlier appropriations of the session, and there would be a definite squeeze on the later ones, probably.

Mr. SMITH. The last one might be the defense appropriation bill, and you couldn't pass it until you had the Ways and Means Committee compute

Mr. GUBSER. Unless Congress had used foresight throughout the

session.

Mr. FASCELL. And that foresight would be to pass the defense bill last. We would really then squeeze the last drops out of everything. Mr. SMITH. Well, for example, under this bill-so I will know how it operates-we will suppose that the total amount in the President's budget-that is what you are talking about-suppose that had been exceeded, and up comes the San Luis project we had here a couple of weeks ago. Then you would be against passing that until or unless the Ways and Means Committee passes another bill first, or how do you operate this?

Mr. GUBSER. Yes; I would, and I will say to you very frankly that this is an imperfect way of doing it, but what we are doing now is so imperfect that I think we have got to take some drastic means, and perhaps if we realize this, we would be a little careful in some of the earlier bills.

Mr. SMITH. Well, as you know, that bill was a controversial bill. Do you wait to see whether or not it is passed, first?

Mr. GUBSER. Well, it was just an authorization bill, it was not an appropriation bill.